The Competitive Edge -- Globalization Comes Under Siege

June 9, 2008
A rising tide of anti-globalization sentiment could threaten trade-dependent U.S. manufacturers.

A few short years ago, Thomas Friedman crystallized both academic studies and leading opinion about the inevitable advance of global integration in his book The World Is Flat. More recently, no matter where one turns, there is evidence of reaction against, and resistance to, globalization. Is this just one of the periodic swings in public opinion and political rhetoric (noted academics like Alan Blinder share this view, too), or has the tide turned strongly enough to roll back the changes of the last few decades? Given the current strength in U.S. manufacturing exports and weakness of domestic demand, this is a crucial question for industry leaders.

The signs of anti-globalization sentiment are legion, both here and abroad:

  • U.S. presidential candidates are calling for revising NAFTA and halting further trade agreements;
  • tainted toys, drugs and food imported from China and elsewhere have revived fears of the safety and quality of imports;
  • the accumulation of vast foreign currency holdings by "sovereign wealth funds" is stoking fears of foreign purchases of strategic U.S. firms;
  • the rise of new nationalized foreign firms, especially in the natural resources industries, is raising fears of unfair competition, outright economic nationalism and national competition for scarce resources;
  • worldwide food shortages have caused many countries to limit exports of food commodities;
  • and large-scale movement of workers across borders has provoked a fierce debate over labor competition and fears of disruptive waves of immigration.

The culmination of these disparate anti-globalization elements was the vote in the U.S. House of Representatives to scuttle (for the foreseeable future) the U.S.-Colombia Free Trade Agreement, and to dismantle the "fast-track" rules which have allowed U.S. trade negotiators to complete trade agreements and ensure an up-or-down vote in Congress since 1974. According to trade expert C. Fred Bergsten of the Peterson Institute for International Economics, the vote to end fast-track "instantaneously destroyed the credibility of the United States as a negotiating partner in the eyes of the world."

Taken together, these forces represent the most serious threat to global integration and free trade since the end of the disastrous protectionist era bookended by the two World Wars. Even though the purely economic case for further trade liberalization has not been repealed, especially for the increasingly trade-dependent U.S. manufacturing sector, even a victory by free trade proponent John McCain in the 2008 presidential election will not be enough to offset a Democratic Congress and emotional anti-global sentiment.

Here are a few tentative observations about the climate for globalization in the years ahead.

First, China and the European Union will not stand still; both are pursuing enhanced regional economic integration. The United States can ill afford to be left out, especially in the vital Asian markets. Additionally, economic nationalism in Russia, China and Latin America will only be further provoked by protectionist sentiments in the United States.

Second, high transport costs, economic nationalism and political instability in the developing world are all likely to persist and strengthen the case for producing locally for foreign markets.

Finally, U.S. proponents of further global economic integration will need to sharpen their arguments and find new ways to soften trade's impact on domestic workers and consumers through enhanced education and training programs and more openness to global safety and quality standards. The upcoming presidential election will be a major test of whether we will move forward or backward.

Dr. Duesterberg is president and CEO of the Manufacturers Alliance/MAPI, an executive education and business research organization in Arlington, Va.

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